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New Clause 9


Energy efficiency and water conservation: fiscal and economic report

‘(1) The Chancellor of the Exchequer must, within one year of the passing of this Act and annually thereafter prepare and publish a report on such fiscal measures he considers appropriate to assist with—

(a) energy efficiency; and

(b) microgeneration; and

(c) small scale local energy generation;

(d) the conservation of water by householders.

(2) In preparing the report under subsection (1), the Chancellor of the Exchequer shall take reasonable steps to consult local authorities and such persons as in his opinion have an interest in—

(a) enhancing the United Kingdom contribution to combating climate change; and

(b) alleviating fuel poverty; and

(c) conserving supplies of water.

(3) In this section—

“microgeneration” has the same meaning as in section 82 of the Energy Act 2004;

“small scale local energy generation” means generation of energy—

(a) in the case of electricity, generation by plant not exceeding 20 megawatts, and

(b) in the case of heat, production by plant not exceeding 100 megawatts thermal.’.— [Alan Simpson.]

Brought up, and read the First time.

Alan Simpson (Nottingham, South) (Lab): I beg to move, That the clause be read a Second time.

Mr. Speaker: With this it will be convenient to discuss the following:

New clause 10— Energy efficiency: lower rate of stamp duty land tax—


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‘(1) The Finance Act 2003 (c. 14) is amended according to the provisions of Schedule—(Stamp Duty Land Tax: lower rate for certain measures).

(2) The Schedule (Stamp Duty Land Tax: lower rate for certain measures) has effect.’.

New schedule 1— Stamp duty land tax; lower rate for certain measures——

‘Schedule

Stamp Duty Land Tax; lower rate for certain measures

21 After section 92 of the Finance Act 2003 insert—

“92A Lower rate where notice given relating to specified measures

(1) This section applies where—

(a) the purchaser is liable to pay the tax in respect of a chargeable transaction,

(b) the relevant land consists entirely of residential property, and

(c) the purchaser has given notice of an intention to undertake or to have undertaken relevant specified measures within the relevant period.

(2) Where this section applies, regulations shall prescribe a lower rate of tax chargeable in respect of the transaction, and different lower rates may apply to the undertaking of different relevant measures.

(3) The lower rate in regulations under subsection (2) may be expressed as—

(a) a percentage of the chargeable consideration,

(b) a percentage of the amount of the tax in respect of the chargeable transaction that would be payable if this section were not to apply, or

(c) a specified monetary reduction in the amount of tax payable.

(4) In determining the lower rate in regulations under subsection (2), the Treasury shall have regard to—

(a) any energy efficiency aims for residential accommodation designated under section 2 or 3 of the Sustainable Energy Act 2003 (energy efficiency in residential accommodation: designation by Secretary of State and by the National Assembly for Wales), and

(b) the duty of the Secretary of State under section 217(1) of the Housing Act 2004 (duty in relation to increase in energy efficiency of residential accommodation in England), and

(c) the microgeneration strategy published pursuant to section 82 of the Energy Act 2004; and

(d) the need to conserve water.

(5) Notice for the purpose of subsection (1)(c) shall be given in writing in such terms as may be prescribed by regulations.

(6) Regulations shall—

(a) prescribe ‘relevant specified measures’ for the purposes of this section, and

(b) specify the extent to which the lower rate prescribed under regulations under this section is payable in relation to different specified measures undertaken.

(7) The prescribed definition under subsection (6) shall include—

(a) measures to improve the thermal insulation of the property,

(b) other measures to improve the energy efficiency of the property,

(c) the installation of microgeneration measures,

(d) the installation of water saving measures.

92B Arrangements in relation to lower rate under s. 92A

(1) Where section 92A applies, regulations may require a person or body other than the purchaser to retain the relevant amount until a decision is made that the relevant specified energy
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efficiency measures have been undertaking by or on behalf of the purchaser.

(2) Regulations may prescribe the person or body that is to decide whether or not the relevant energy efficiency measures have been undertaken.

(3) Any such decision must be taken within, or as soon as practicable after the relevant period.

(4) Where it is decided that the relevant specified measures have been taken within the relevant period, the relevant amount, and any interest payable on it, shall be paid to the purchaser.

(5) Where it is decided that the relevant specified measures have not been taken within the relevant period, the relevant amount, and any interest payable on it, shall be payable in the same manner as the tax.

(6) Interest payable under subsections (4) and (5) shall be determined in accordance with the provisions of section 87.

(7) Regulations may amend Schedules 10 and 12 so as to provide for—

(a) the making of returns in relation to the provisions of section 92A and this section and regulations made under them,

(b) duties to keep and preserve records in relation to those provisions and regulations,

(c) appeals against decisions under those provisions and regulations, and

(d) the recovery of relevant amounts and interest payable on them.

(8) The powers to make regulations under section 92A and this section are exercisable by the Treasury.

22 In section 92A and this section—

“the relevant amount” means an amount that is the difference between—

(a) the amount of the tax in respect of the chargeable transaction that would be payable if section 92A were not to apply, and

(b) the amount of tax in respect of the chargeable transaction that is payable under section 92A;

“the relevant period” means a period to be specified in regulations beginning with the date on which the tax becomes payable.

23 In section 114 (orders and regulations made by the Treasury or Inland Revenue), in subsection (4), at the end, insert “paragraph 9A(1) of Schedule 19 (commencement of sections 92A and 92B.”24 In Schedule 19 (Stamp duty land tax: commencement and transitional provisions), after paragraph 9, insert—

Commencement of sections 92A and 92B

9A. (1) Sections 92A and 92B shall come into force in accordance with the provisions of an order made by the Treasury.

(2) No order may be made under sub-paragraph (1) before the coming into force of section 155 of the Housing Act 2004 (duty to have a home information pack).”.’.

Alan Simpson: The provisions have been tabled by members of all parties represented in the House, and if you will allow me, Mr. Speaker, I shall speak to new clause 10 and new schedule 1 as well as to new clause 9.

New clause 9 makes the revolutionary proposal that the Chancellor submit to the House an annual report on fiscal measures—and their success—to assist with energy efficiency, microgeneration, the development of local energy systems and water conservation measures, all of which are the subject of Government policies and targets. However, there is a gap between the wish to deliver those targets and the way in which we do so.


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It could be argued that it is not necessary to require the Chancellor to make such a report to the House. After all, in section 82 of the Energy Act 2004, which sets the basis of a Government policy promoting the development of microgeneration systems, there is a duty to report. Under the Climate Change and Sustainable Energy Act 2006, which was wonderfully piloted through the House by my hon. Friend the Member for Edinburgh, North and Leith (Mark Lazarowicz), a duty will follow for the Department for Environment, Food and Rural Affairs and the Department of Trade and Industry to report, one on climate change and the other on the sustainable energy implications.

It is worth noting that both those Acts started out with a presumption that there would need to be a Treasury reporting role addressing the fiscal measures that were necessary to make the policies work, but in order to get both Acts on the statute book, the Treasury required itself to be excluded from the reporting process. That leaves an enormous hole in the coherence of Government plans for tackling climate change and the delivery of sustainable energy strategies. How can we exclude fiscal measures from the sustainability programme, when they are at the very centre of it?

In Germany the Government have transformed the energy market through an inversion of the fiscal rules that govern that market, so that microgeneration becomes the norm in developments, rather than being stuck on at the end. Elsewhere, particularly in Denmark and the Netherlands, fiscal measures have been used to promote the development of decentralised energy systems in ways that will offer a new approach to energy security in the 21st century.

My argument is that for us in this country, this Parliament and this Government it is not coherent to talk about joined-up government if we suggest that fiscal measures, and a Treasury lead on those measures, should be the exemption clause in our overall sustainable energy strategies. Everyone knows of the Prime Minister’s support for renewable energy, and the DTI estimates that 40 per cent. of UK energy needs could be met by decentralised energy by 2050. The difficulty is that no one seems to know how we get from where we are now to where we would like to be in 2050—at least, not without a clear fiscal lead that comes from the heart of Government and the heart of the Treasury.

Every Budget report since 2002 has made reference to energy efficiency and the reduction of carbon emissions. Every Budget has brought with it some measure relating to domestic energy efficiency or microgeneration, but in most cases those have been limited to VAT adjustments or enhanced capital allowances. Fiscal measures have been small scale, piecemeal and unconnected to an overall Government strategy. A specific duty would allow us to develop such a fiscally strategic approach to how Britain will meet its climate change challenge and its fuel poverty targets in the 21st century.

It is not that we do not know the scale of the problems that we face. It is just that we do not engage with the scale of the solutions that we need. Let me put that in context. From the figures provided to us by DEFRA, we know that carbon emissions over
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recent years have started to increase again and are 158.4 million tonnes a year. Of that, the domestic contribution to increasing carbon emissions has risen to 41.2 million tonnes a year.

Fuel poverty is also back on the increase. The last figures that we have before Labour came to power are those for 1996, when 5.1 million people were officially recognised as living in fuel poverty in the UK. By 2003, a succession of Labour Government programmes had reduced that figure to 1.2 million. By 2005, however, the number of households was back up to 2.2 million, and the projection for this year is sitting at around 3 million households now living in fuel poverty.

Why have the numbers started to increase? One simple set of figures speaks volumes—those for the change in energy prices. Between January 2003 and March 2006, average gas prices in the UK increased by 57 per cent. and electricity prices by 37 per cent. Therefore, increasing energy prices are pushing more people back into fuel poverty than our Warm Front programme is able to take out of it.

10 pm

Mr. Peter Bone (Wellingborough) (Con): Does the hon. Gentleman agree that part of the rise in prices for consumers that has affected poverty is accounted for by the fact that the EU has not fully liberalised the gas market in continental Europe, and that has added £186 a year to the cost for an average family?

Alan Simpson: No, I do not agree. One of the problems that we have in the UK is that we are now paying the price for the way in which we have sought to liberalise our energy markets. I have taken the trouble to ask most of the energy suppliers in the country to tell me what their long-term plans are for selling people less energy, and encouraging less energy consumption. Not a single one can do that. They just look at anyone who asks that question as if they were barking mad. Yet they know that we cannot continue to live in a world where we consume ourselves to death through the energy inputs that are responsible for the climate change outputs that devastate the rest of the planet. We will have to move to a different way of thinking about energy use and energy generation.

The difficulty is that when one asks the energy suppliers why they cannot make that move, even though intellectually they can understand the necessity of it, they say that they are required to engage in a market driven by short-term price considerations. How to break out of that short-term trap is one of the biggest challenges that we face, not just in this House but in this society. That is why we need a Treasury lead and a coherent fiscal strategy for how we set about delivering on our sustainability policies.

At the moment, 10 million people in the south of England face a hosepipe ban. In addition, millions of others are being warned of long-term water shortages that will be part of the cost and consequences of the climate change damage that we have done during the past 30 years. It is inconceivable that the public will allow us to go far down a path that ignores those issues, or excludes them from being at the heart of our Budget thinking about how we manage the economy. Putting that at the heart of our thinking, rather than having
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responsibility devolved into a series of separate, often unconnected and at times conflicting departmental policies, adds to the weight of argument about why there needs to be a Treasury lead—a Chancellor’s lead—in addressing the issue head-on.

New clause 10 and the schedule attached to it is the one specific proposal that would allow for the introduction of a lower rate of stamp duty or a rebate for the introduction of energy efficiency measures. In support of that I want to cite a number of points. Members should just cast their eyes over early-day motion 214, which was submitted by my right hon. Friend the Member for Rother Valley (Mr. Barron). It has 262 signatures from Members of all parties in the House, and it makes precisely the point about the need for a stamp duty rebate tied to the introduction of energy efficiency measures in the home.

Just over a week ago, the Energy Saving Trust and the Policy Studies Institute held a seminar for virtually all sectors of the energy industry, along with environmental and fuel poverty organisations. Officials from both the Department for Environment, Food and Rural Affairs and the Treasury were also present. Those at the seminar considered a long list of proposals about the sort of fiscal measures that would effectively promote the introduction of energy efficiency in the home. The single measure that emerged as by far the most popular way of achieving that was the introduction of a stamp duty rebate. It is important that we acknowledge the weight of pressure that people who are in the business of making things work feel that we could achieve if we wanted to make that happen.

Mr. Frank Field (Birkenhead) (Lab): Does my hon. Friend accept that he would simply be developing existing Government policy? In our inner-city areas in which sales needed stimulus, the Government gave stamp duty exemptions, and the policy was successful.

Alan Simpson: I had forgotten about that point, so I am grateful to my right hon. Friend for reminding me of it. He is absolutely right to say that I tabled this measure in support of Government policy, rather than in opposition to it.

Let me give the clearest example that I can offer. In our energy White Paper, the Government made a specific commitment by setting a target that 4.5 million of the homes with cavity walls should be fully cavity wall insulated by 2010. At present, there are about 9 million homes with cavity walls throughout the UK. Each year, about 80,000 of those homes become fully insulated. If we were to deliver on our programme by 2010, there would have to be a sixfold increase in the rate at which the existing policy is working.

How do we deliver such a sixfold increase? When we talk to people in the industry and the relevant sectors, they point out that by and large, the most successful time for intervention is when people are moving house. When people are in the process of buying a new home or trying to sell their existing home, they examine what they have to sell and consider what they want to buy. At that point, stamp duty is a significant financial consideration for many such people. If we could tie rebate measures into delivering the strategies and
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policies that we have set out our stall to carry out by 2010—without looking for new ones—we might deliver what we promised.

There would be not only a big environmental plus to that, but a big creditability plus. There is nothing worse for the credibility of Parliament and Governments than making promises but failing to deliver on them. I am proposing a simple measure, and almost everyone in the industry is saying, “Give us this mechanism and we’ll deliver the outcomes that you in Parliament say you want.” The proposal has the support of the Energy Saving Trust, the Royal Commission on Environmental Pollution and the House’s own Environmental Audit Committee.

Mr. Frank Field: Given my hon. Friend’s normal stance, is there not some originality in his position of encouraging the Treasury Bench to adopt and support a market-led solution?

Alan Simpson: That might tempt me to re-think my position. I accept that there is important validity in what my right hon. Friend says. My explanation cum defence is that I have always said that there is nothing moral about markets. Left to their own devices, markets are entirely amoral. They acquire a morality only if politicians and political leaders of the day have the courage to deliver a moral framework. Since we have said this in our policies and set this out in our targets, why can we not say it in the measures on which we seek to deliver? I hope that the House will have the courage to do so.

Mr. Paul Goodman: The House owes a debt to the hon. Member for Nottingham, South (Alan Simpson) and to all his accomplices, if that is exactly the right word, for enabling us to debate microgeneration, energy efficiency and sustainability under the terms of the Finance Bill. Indeed, as the hon. Gentleman emphasised, those accomplices come from all parts of the House, and include my hon. Friend the Member for Buckingham (John Bercow), who is in his place.

I will set out why the official Opposition intend to support new clause 9 if it is to be pressed to a vote, but why we do not feel, as matters stand, that we can support new clause 10 and new schedule 1, which are grouped with it. As for new clause 9, the right hon. Member for Birkenhead (Mr. Field), in his characteristically mischievous way, set out exactly why the Opposition would be likely to look on the new clause favourably. He referred, if I can read my scribble, to a market-led solution, which is exactly what the hon. Member for Nottingham, South has proposed.

New clause 9 is rather more modest because it merely asks that the Chancellor should, within a year, produce a report on “fiscal measures” that would assist


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